Amendment in section 236C

Amendment in section 236C: Finance Act 2023 to give effect to the financial proposals of the Federal Government for the year beginning on the first day of July, 2023, and to amend certain laws WHEREAS, it is expedient to make provisions to give effect to the financial proposals of the Federal Government for the year beginning on the first day of July, 2023, and to amend certain laws for the purposes hereinafter appearing;

Finance Act, 2023 has introduced a new sub-section (2A) in section 236C of the Ordinance which places a bar on the person responsible for registering, recording or attesting transfer of any immovable property to register, record or attest such sale or transfer unless the seller or transferor has discharged his tax liability under section 7E of the Ordinance and evidence to this effect has been furnished to the withholding agent. In this regard, a separate circular No. 1 of 2023 has been issued describing mode, form and manner for furnishing evidence of the payment of tax under section 7E by both ATL and Non-ATL persons to the persons responsible for registering, recording or attesting transfer of any immovable property.

Restriction on non-ATL persons to claim benefits of capital assets exclusion u/s 7E

Section 7E was introduced through Finance Act, 2022 whereby every resident person is treated to drive, as income, an amount equal to five percent of the fair market value of capital assets situated in Pakistan. Certain capital assets themselves or capital assets up to a monetary limit of Rs. 25(m) are excluded from the purview of tax chargeable under sub-section (2) of this section. A new proviso has been added under section (2) whereby benefit of following capital assets exclusions mentioned at clauses (a), (e), (f) and (g) of sub-section (2) of section 7E of the Ordinance has been restricted to ATL persons only.

(a) one capital asset owned by the resident person;

(e) any property from which income is chargeable to tax under the Ordinance
and tax leviable is paid thereon;

(f) capital asset in the first tax year of acquisition where tax under section
236K has been paid;

(g) where the fair market value of the capital assets in aggregate excluding the capital assets mentioned in clauses (a), (b), (c), (d), (e) and (f) does not exceed Rupees twenty-five million;

However, this newly introduced proviso to sub-section (2) of section 7E will not apply on persons covered under rule (2) of Tenth Schedule to the Ordinance who are not required to file an income tax return under section 114 of the Ordinance.

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